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Fulfillment of ESG Responsibilities and Firm Performance: A Zero-Sum Game or Mutually Beneficial

Author

Listed:
  • Liang Chen

    (School of Economics, Tianjin University of Commerce, Tianjin 300134, China)

  • Tian Yuan

    (School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China)

  • Richard J. Cebula

    (The Center for the Study of Public Choice, Department of Economics, George Mason University, Fairfax, VA 22030, USA)

  • Wang Shuangjin

    (School of Management, Tianjin University of Commerce, Tianjin 300134, China)

  • Maggie Foley

    (Davis Business School, Jacksonville University, Jacksonville, FL 32211, USA)

Abstract

Focusing on the 311 Chinese firms listed in the global markets from 2008 to 2019, based on the trade-off theory and the resource slack theory, using panel vector autoregressive model and panel threshold model, this paper explores the impact of fulfilling ESG responsibility on firm performance. The study reveals that in the short run, fulfilling ESG responsibility presents a “Substitution Effect,” whereas, in the long run, it presents a “Promotional Effect.” On the other hand, the improvement of firm performance has a significantly positive impact on ESG fulfillment investment, even though there is a strong hysteresis effect. Significant heterogeneity exists regarding the relationship between ESG fulfillment and firm performance. ESG fulfillment has a negative impact on firm performance in the short run, with the most affected firms being those small and mid-sized firms listed in the Mainland China markets. In the near term, the impact of firm performance on ESG fulfillment is positive, with those listed in the overseas markets and large firms being affected the most. The study reveals that firm size and the factors affiliated with ESG fulfillment tend to cause the differentiation effect in the inhibitory influence of ESG fulfillment on firm performance in the short run. This study could be used as a guideline for the social responsibilities of nonprofit organizations.

Suggested Citation

  • Liang Chen & Tian Yuan & Richard J. Cebula & Wang Shuangjin & Maggie Foley, 2021. "Fulfillment of ESG Responsibilities and Firm Performance: A Zero-Sum Game or Mutually Beneficial," Sustainability, MDPI, vol. 13(19), pages 1-17, October.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:19:p:10954-:d:648627
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    Citations

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    Cited by:

    1. Imen Khanchel & Naima Lassoued, 2022. "ESG Disclosure and the Cost of Capital: Is There a Ratcheting Effect over Time?," Sustainability, MDPI, vol. 14(15), pages 1-19, July.
    2. He, Hui & Shi, Wei, 2023. "Enterprise litigation risk and enterprise performance," Finance Research Letters, Elsevier, vol. 55(PA).
    3. Hebah Shalhoob & Khaled Hussainey, 2022. "Environmental, Social and Governance (ESG) Disclosure and the Small and Medium Enterprises (SMEs) Sustainability Performance," Sustainability, MDPI, vol. 15(1), pages 1-18, December.
    4. Yinglin Wang & Leqi Chen & Jiaxin Zhuang, 2024. "Research on ESG Investment Efficiency Regulation from the Perspective of Reciprocity and Evolutionary Game," Computational Economics, Springer;Society for Computational Economics, vol. 64(3), pages 1665-1695, September.
    5. Ahmed Mohamed Habib & Nahia Mourad, 2024. "The Influence of Environmental, Social, and Governance (ESG) Practices on US Firms’ Performance: Evidence from the Coronavirus Crisis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 2549-2570, March.

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